Data from the U.S. Census Bureau’s American Community Survey (ACS) data was released a couple of weeks ago, and I’m surprised how little coverage of its findings there has been in the media. Most of what I have read, moreover, compared 2015 with 2014, or with 2010, and finds that the economy is getting much better for many Americans.
That, however, is not a meaningful comparison if one is looking to the long term, or trying to explain why so many Americans feel so much worse off. One would expect that people would become better off in the recovery from a deep recession, or worse off in the aftermath of the peak of a bubble. Politicians, seeking to make points for their sides, often base their talking points on data from such non-comparable years, but that is disingenuous. As it happens, there are enough economic similarities between the first year of American Community Survey data, in 2005, and the latest year, 2015, to make a comparison between them meaningful. What follows is a discussion, with 26 charts, of the economic trends I found most interesting from that comparison – for the United States, New York City, and New York State, New Jersey and Connecticut. Let’s take a break from the fantasy and deception of politics and look at some reality.
Here is food for thought. In 1978 I earned the minimum wage: $2.65 per hour. Adjusted for inflation that is $9.68. The current minimum wage of $7.25 is therefore about 25 percent lower. So have those earning the minimum wage become that much worse off relative to most Americans? After thinking about it, perhaps not. Perhaps that 25 percent decrease is just about typical. In fact, it suddenly hit me that I had seen something like a 25 percent decrease in well being elsewhere, in other contexts.
The past 35 years or so have seen a persistent history with regard to federal tax revenues. Republicans, who have dominated the federal government for most of that time, have cut the taxes that fall more heavily on businesses and the wealthy, the personal and corporate income tax. And then following a fiscal disaster and soaring deficits, Democrats increased those same taxes. In the end the personal income tax ended up, as a percent of GDP, about where it was – at 8.1% of GDP in FY 2014 compared with 7.9% of GDP in FY 1978. While the corporate income tax ended up lower, at 1.9% of GDP compared with 2.6%. This is true even though profits account for a higher share of GDP today than they did in 1978, and work earnings at the top account for a much higher share of total earnings, factors that should have increased personal and corporate income tax revenues as a percent of GDP even with the exact same rules.
Payroll taxes, meanwhile, were substantially increased by the Republicans and never reduced, save for a special exemption in the Great Recession. These taxes fall exclusively on work income in the United States, and more heavily on the working and middle classes. The wealthy pay less, as a percent of their income, the retired do not pay at all and, with regard to international trade, work done in the United States is subject to the tax whereas goods imported from abroad are tax-free. The payroll tax burden increased from 5.3% of GDP in FY 1978 to 6.5% in FY 2001. Before falling to 5.9% in FY 2014, after the share of Americans working and average work income plunged in the Great Recession. Other federal revenues, such as excise taxes, estate taxes, and customs duties totaled 1.7% of GDP in FY 1978 and 1.6% of GDP in FY 2014, although the composition of this category has changed. These trends are discussed in more detail below.
“The unexpected rise of a self-avowed socialist and a bellicose billionaire who can’t seem to shake supporters no matter how outrageous his comments have the Republican and Democratic establishments worried. One notable moderate, business tycoon and former New York City mayor Michael Bloomberg, is concerned enough that he is reportedly exploring the idea of jumping into the race himself.”
But unless Bloomberg were to say and do something completely unexpected, such a candidacy would be little more than a one-man ego trip. On policy, “maintain the status quo” is hardly a winning battle cry for an outsider candidate, one likely to attract little if any grass roots support and to bring few if any new people into the political process. Meanwhile those in on the game will always throw their support behind those mostly likely to win, the two major party candidates, to protect their prerogatives. As things stand Bloomberg would have a hard time matching the impact of former independent presidential candidates John Anderson (1980) and Ralph Nadar (2000), and would have no chance of matching the impact of H. Ross Perot (1992).
The Trump and Sanders campaigns are symptoms of a diminished future that has now arrived as a result of a 35-year party by Generation Greed. These men cannot explain it, don’t offer a forward-looking alternative, and do little other than identify scapegoats and promise that the party can resume if they are elected. The same may be said of the other candidates. But unless Bloomberg is willing to talk honestly about the future those age 55 and younger have woken up to, he might as well save his $billions and stay home.
In the 1950s and 1960s, a generation used New York City (and other central cities) as cash cows, and then decamped for the suburbs, spitting on the ground as they left. They voted themselves richer pensions but didn’t pay for them, with the best off public employees – police, fire, teachers – among the first to run for the exits. They ran up debts while failing to maintain the infrastructure. They benefitted from rent control even as their income increased, providing them with money needed to buy homes in the suburbs but not providing landlords with a sufficient incentive to reinvest in their buildings. Eventually, as things started to go downhill, the large corporations that the cities had nurtured followed the middle class out the door, to their own fortress like suburban campuses.
Now it is five decades later and what do we find? Like a plague of locusts, the generations that moved to the suburbs have turned the same trick there. New Jersey and Connecticut are small states that had a number of small, pre-suburban industrial cities. For the most part, however, these two states are suburban – the two most suburban states in the nation, and for most of the past four decades the two richest. Despite this they are now among the most bankrupt. And once again, the rats are fleeing the sinking ship.
In September 2012 it was reported that the death rate was rising, and life expectancy falling, for middle-aged White women who had not completed high school. In March 2015 a subsequent study showed that life expectancy was falling for middle-aged White women in general, as I discussed here.
Now a new study has found a surge in mortality, and thus a decrease in life expectancy, for all White people age 45 to 54. All of these studies have been greeted with shock and disbelief, but they are no surprise to me. I predicted this years ago. This is just the tip of the iceberg, and sooner or later people will have to face the fact that what is happening isn’t about gender, or education, or race, or middle age. Those age 45 to 54 today are the first generation of Americans to be worse off economically than prior generations had been at the same age. The generation that was in childhood when the divorce and single parenthood wave hit, and thus the first to be affected by it. The first of a series of generations that have been disadvantaged in public policy. The first of the generations to follow in the wake of Generation Greed.
For nearly 30 years Americans, individually and collectively, have sold the future to live for today. In the private sector each generation of Americans since those born in the mid-1950s has been paid less on average, and yet has spent more, failing to save for retirement and borrowing to make up the difference. Corporate executives had their firms borrow, not to invest in income producing assets, but to buy back stock, temporarily increasing stock prices so they could cash in on bonuses and options. Despite future financial strains on Social Security and Medicare from the retirement of the large Baby Boom generation, the federal government cut taxes drastically in the early 1980s and again in the early 2000s, while spending with abandon on health care for older seniors, ultimately leaving behind a pile of IOUs that someone else will have to pay somehow.
At the state and local government level infrastructure investment was cut but debts were increased, leaving behind roads, bridges, water, sewer, and transit systems and schools in need of repair with no money to pay for this. And pensions for older public employees who were cashing in and moving out were retroactively increased even as pension funding was cut, leaving a financial disaster behind. The state and local government aspect of this future selling, however, varies in severity from place to place. Using an analysis of Census of Governments data from the U.S. Census Bureau, this post will rank the extent to which each state’s future has been sold by its current and past politicians and the interest groups that supported them.